Love the analysis. My one comment would be that Yellen did mention recently that she’s comfortable running above their historical 15-20% range for bills. MMF are eating that issuance up because it’s the sweet spot for them to move out of RRP to consume US debt.
Yeah MMFs have been getting a spread of 7-15bps over SOFR Futures implied RRP path the last 3-4 months buying the net new bills. The bill demand is certainly there for probably another 1-1.5T in net bill issuance. If Treasury pulls back (vs Aug QRA) on the Q4 increases and/or has little to no Q1 further increases, I expect your comment would be the explanation.
Either way, I think you’re right over that timeline that total issuance will continue to increase. If Congress somehow finds this deficit Jesus, we all better go out and buy a lotto ticket.
TGA is already 834 on 10/24 and the California tax payments were deferred till November. I have to assume some California paid before they were aware of the deferment. There is, however, more to come.
This FY has two California tax payments Oct-Nov and Apr.
Do you think it might mean less bills if taxes come in higher than the august QRA estimate?
Also in your weekly estimates of TGA withdrawal, there are weeks that go up to 800+ but the avg weekly for any month rarely goes above 675. Would they increase TGA to 850+ in that case then they told us their year end Q1 target is 750?
My hope is that they less bills and maybe even less coupons. I’m a newbie so please excuse any silly analysis.
The extension of the deferment came very close to the original oct 16th deadline. Doubt much took advantage of the november extension though i guess we will see.
If my estimated deficit through year end is high (from say another big tax trove from California) then it would mean less bill issuance in Q4 (or even more additional add to the TGA level). Again we shall see.
I agree the fact Treasury said 750 EOY in august QRA argues for it being that. OTOH, the rash of bill issuance since then significantly ups the gross debt redemptions each week now. No reason Treasury shouldnt have been able to predict that in August but sometimes things get missed. Either way, I believe the TGA level needs to account for spike weeks and that Treasury would prefer having more than the week ahead outflow cushion in the TGA most of the time to have it for all the spike weeks. My main evidence for that is the rise to 834 today and 4,8, and 17 week bill offerings this morning at the same level they have been which were upped beginning of october. doesnt make sense to me to accelerate the bill issuance earlier this month only to slow it down again in short order. But maybe Treasury had no idea the CA tax receipts would come in as strong as they did mid month. Again we shall see in a week.
Your analysis is not at all silly, totally valid questions/critiques of my reasoning. Most appreciated.
Great article. Tremendous detailed knowledge, much better than bank sell side
Love the analysis. My one comment would be that Yellen did mention recently that she’s comfortable running above their historical 15-20% range for bills. MMF are eating that issuance up because it’s the sweet spot for them to move out of RRP to consume US debt.
Yeah MMFs have been getting a spread of 7-15bps over SOFR Futures implied RRP path the last 3-4 months buying the net new bills. The bill demand is certainly there for probably another 1-1.5T in net bill issuance. If Treasury pulls back (vs Aug QRA) on the Q4 increases and/or has little to no Q1 further increases, I expect your comment would be the explanation.
Either way, I think you’re right over that timeline that total issuance will continue to increase. If Congress somehow finds this deficit Jesus, we all better go out and buy a lotto ticket.
Awesome stuff John - incredibly helpful!
Excellent excellent work. Bravo
Hi John. Thank you very much for posting.
TGA is already 834 on 10/24 and the California tax payments were deferred till November. I have to assume some California paid before they were aware of the deferment. There is, however, more to come.
This FY has two California tax payments Oct-Nov and Apr.
Do you think it might mean less bills if taxes come in higher than the august QRA estimate?
Also in your weekly estimates of TGA withdrawal, there are weeks that go up to 800+ but the avg weekly for any month rarely goes above 675. Would they increase TGA to 850+ in that case then they told us their year end Q1 target is 750?
My hope is that they less bills and maybe even less coupons. I’m a newbie so please excuse any silly analysis.
The extension of the deferment came very close to the original oct 16th deadline. Doubt much took advantage of the november extension though i guess we will see.
If my estimated deficit through year end is high (from say another big tax trove from California) then it would mean less bill issuance in Q4 (or even more additional add to the TGA level). Again we shall see.
I agree the fact Treasury said 750 EOY in august QRA argues for it being that. OTOH, the rash of bill issuance since then significantly ups the gross debt redemptions each week now. No reason Treasury shouldnt have been able to predict that in August but sometimes things get missed. Either way, I believe the TGA level needs to account for spike weeks and that Treasury would prefer having more than the week ahead outflow cushion in the TGA most of the time to have it for all the spike weeks. My main evidence for that is the rise to 834 today and 4,8, and 17 week bill offerings this morning at the same level they have been which were upped beginning of october. doesnt make sense to me to accelerate the bill issuance earlier this month only to slow it down again in short order. But maybe Treasury had no idea the CA tax receipts would come in as strong as they did mid month. Again we shall see in a week.
Your analysis is not at all silly, totally valid questions/critiques of my reasoning. Most appreciated.